Page 11 - FINANCE PART 2 - 8. Businesses In Difficulty
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BUSINESSES IN DIFFICULTY
Business recovery and restructuring
• Often, even though businesses find themselves in
difficulty, they may possess some valuable characteristics
(i.e. sound management, an innovative product, etc).
• Sometimes, it is these valuable characteristics that
should be utilised to assist them in recovering from their
difficulty.
• A constructive way of dealing with a business in financial
difficulty is to reorganise the business. Reorganisation is
the restructuring of a failing firm in an attempt to
continue operations as a going concern, and may involve
any/all of the following:
• reconstructing the financial structure of the firm/refinancing the firm
• introducing a flatter management structure
• closing down non-profitable operations and products
• divestitures, i.e. selling non-profitable assets, divisions, subsidiaries,
etc
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